Court Orders Hytera to Pay Over $70 Million to Motorola in Trade-Secret Dispute

Hytera Communications divested its Spanish subsidiary, Teltronic, by selling it to Next Gen Critical Comms for 75.5 million euros (628 million yuan).

The move is expected to result in a pretax gain of 80 million yuan, according to a Tuesday filing with the Shanghai bourse.

Shares of the communications equipment manufacturer were down 1% in recent trade.

Hytera Communications forecasts first-half attributable net profit of between 80 million yuan and 100 million yuan, compared with 162.4 million yuan the previous year.

The up to 51% decline is due to delays in overseas project deliveries and a slowdown in the electronics manufacturing services business, according to a Tuesday filing with the Shenzhen bourse.

Shares of the communications equipment manufacturer were down 1% in recent trade.

The US Federal Communications Commission probed Chinese companies placed under the commission's "covered list" to find out whether they are circumventing US restrictions, it said Friday.

The companies could still be operating in the US because they do not believe the designation disallows certain types of operations, Chairperson Brendan Carr said.

"Some or all of these Covered List entities are trying to make an end run around those FCC prohibitions by continuing to do business in America on a private or 'unregulated' basis," Carr said.

Among those under the covered list include Huawei, ZTE , Hytera Communications , Hikvision , China Mobile's China Mobile International USA, China Telecom's China Telecom (Americas), Dahua Technology , and China Unicom's China Unicom (Americas).

The FCC will move to close what it calls loopholes that have allowed 'untrustworthy, foreign adversary state-backed actors to skirt our rules," Carr said.

The US Federal Communications Commission probed Chinese companies placed under the commission's "covered list" to find out whether they are circumventing US restrictions, it said Friday.

The companies could still be operating in the US because they do not believe the designation disallows certain types of operations, Chairperson Brendan Carr said.

"Some or all of these Covered List entities are trying to make an end run around those FCC prohibitions by continuing to do business in America on a private or 'unregulated' basis," Carr said.

Among those under the covered list include Huawei, ZTE , Hytera Communications , Hikvision , China Mobile's China Mobile International USA, China Telecom's China Telecom (Americas), Dahua Technology , and China Unicom's China Unicom (Americas).

The FCC will move to close what it calls loopholes that have allowed 'untrustworthy, foreign adversary state-backed actors to skirt our rules," Carr said.

Hytera Communications expects to deepen its loss in 2024 amid provisions for contingent liabilities related to legal disputes such as the Motorola trade secret and copyright litigation.

Attributable net loss is expected to range between 3.2 billion yuan and 3.7 billion yuan in 2024, larger than the 387.9 million-yuan loss the previous year, according to a Tuesday filling with the Shenzhen bourse.

2024 revenue is expected to range between 6.0 billion yuan and 6.3 billion yuan, up from 5.65 billion yuan the previous year.

By Richard Vanderford

Hytera Communications, a Chinese telecommunications company, has pleaded guilty to a U.S. conspiracy charge connected to the theft of walkie talkie-related trade secrets from Chicago-based Motorola Solutions.

Hytera entered a guilty plea in federal court in Chicago to a single count of conspiracy to steal trade secrets, U.S. Justice Department prosecutors said Tuesday. The company faces up to $60 million in fines, prosecutors said.

Motorola said it continues to pursue collection of more than $471 million it won in a related civil case against Hytera.

The U.S. Court of Appeals for the Seventh Circuit last year upheld Motorola's allegations in the case, saying Hytera had engaged in a "large and blatant theft of trade secrets" in an effort to try to catch up with Motorola's technological advantage.

"Hytera's admission of guilt in federal court validates the extensive evidence that it is a bad actor and felon, and we remain firmly resolute to holding Hytera accountable for its egregious illegal conduct," said Motorola Solutions Chief Executive Greg Brown.

Hytera didn't respond to a request for comment.

Prosecutors have spent years pursuing a sprawling case against Hytera, a Shenzhen, China-based maker of two-way radios and networking systems. In 2022, they unveiled a 21-count indictment, alleging that Hytera hatched a deliberate scheme to recruit Motorola employees and have them steal proprietary information.

A trial had been scheduled to begin next month

Some employees while still working at Motorola accessed trade secret information, sending emails describing their intentions, prosecutors said.

Hytera's plea deal allows it to admit guilt to a single conspiracy count related to the theft of source code related to digital walkie-talkies. The agreement also caps the maximum penalty at $60 million. Hytera is expected to be sentenced in November.

Prosecutors said that Hytera could have been ordered to pay a fine of more than $907 million because the law allows a fine of up to three times the value of the stolen trade secret to the defendant. Hytera disputes that calculation, prosecutors said.

Several former Hytera employees also face charges, including Gee Siong Kok, a senior vice president who headed Hytera's walkie-talkie division and eventually joined the company's board. He allegedly left a senior engineering role at Motorola to go to Hytera, receiving a 78% wage increase and stock options worth 22 times his annual salary.

Kok pleaded guilty in 2022 and awaits sentencing.

Digital mobile radios, as the walkie-talkies are also called, are used by taxi companies, airports and other businesses that need rapid two-way communication.

In 2022, the Federal Communications Commission banned Hytera from selling some equipment in the U.S., alleging it poses a national security threat, in an action that included bans against several other Chinese equipment makers.

Write to Richard Vanderford at Richard.Vanderford@wsj.com